How do I calculate cost basis for GE stock spin offs after inheritance?

Thanks for explaining. So if the GE shares were worth $50k at time of death, and after the spinoff the original GE was 80% of the value and each of the two spinoffs were 10%, would the cost basis be $40k for GE and $5k for each spinoff? Also do you know if I have to do separate calculations for each time I received a dividend reinvestment over the years?

Your understanding is exactly right. If the GE shares were worth $50k at time of death, and after the spinoff the value proportions were 80% GE and 10% for each spinoff, then your allocated basis would be $40k for the GE shares and $5k for each of the spinoffs. For dividend reinvestments, those are actually separate purchases with different cost bases. Each time dividends were reinvested, those new shares have their own cost basis equal to the market value on the reinvestment date. You'll need to track each reinvestment separately, which is why many investors appreciate brokerages that provide detailed cost basis tracking.

That sounds too good to be true. Does it actually work with complicated situations? My grandmother left me Disney stock from the 70s with tons of splits and spinoffs, and I've been putting off dealing with it for this exact reason.

I'm skeptical about these online calculators. How does it handle situations where the company doesn't publish clear allocation percentages? Also, does it account for wash sales if you bought additional shares around the same time?

Yes, it definitely works with complicated situations. The system has historical data going back decades and handles multiple splits, spinoffs, and mergers - even for stocks held since the 70s like your Disney shares. It's specifically designed for these complex inheritance scenarios. The tool actually has built-in data for cases where companies didn't publish clear allocation percentages. It uses historical market data to calculate fair market value proportions. And yes, it does flag potential wash sales if you bought additional shares within the 30-day window and even helps segregate those transactions for proper tax treatment.

How exactly does this work? Do they just keep calling on your behalf until they get through? I've tried calling the IRS 15 times about a similar stock basis issue and can never get past the automated system.

This sounds like a scam. Why would I pay a service to make phone calls I can make myself? GE investor relations information is publicly available on their website. Seems like a waste of money for something that should be free.

It uses a system that essentially keeps your place in line without you having to stay on hold. They have access to special dial-in numbers and scheduling technology that monitors wait times, and then they call you once they've navigated through the phone tree and have a representative ready to talk. It's not just for the IRS - works for any customer service line with long hold times. No, it's definitely not a scam. I was skeptical too, but the time saved was absolutely worth it. While some information is on GE's website, the specific allocation percentages for older spinoffs and the historical Form 8937 documents I needed weren't easily accessible. Sometimes you need to speak to a specialist, and getting through to one can be nearly impossible without assistance.

I actually did check with the brokerage first - they have the basis for recent transactions but said anything before 2011 (when the mandatory cost basis reporting began) is my responsibility to calculate. Unfortunately, all my inherited shares fall into that category. They suggested I might need to hire a specialized accountant to figure it out, which seems excessive.

That's frustrating but unfortunately common. The 2011 cutoff for mandatory reporting leaves a lot of long-term investors with homework to do. Before hiring an accountant, try contacting GE's investor relations directly - they should have records of all historical spinoffs and the allocation percentages that were used. Also, if you have any old statements showing the original share count and value at inheritance, make sure to keep those. The documentation will be important if you're ever audited, especially for inherited assets where the IRS might question your stepped-up basis calculations.

Is there any benefit to using average cost method instead of specific identification for inherited stock? My broker keeps pushing me to use average cost but won't explain why.

Average cost method is generally simpler for brokers to calculate and track, which is probably why yours is pushing it. However, for inherited stock with spinoffs, specific identification gives you much more control over your tax situation. With inherited shares, you get a stepped-up basis to fair market value at death, which is usually advantageous. If you later have dividend reinvestments or additional purchases at different prices, specific ID lets you choose to sell the lots with the highest basis first to minimize capital gains. Average cost would blend all your basis amounts together, potentially forcing you to recognize more gains than necessary. For complex situations like yours with GE spinoffs, definitely stick with specific identification.

This is really helpful information about the long-term capital gains treatment! I had no idea that inherited stock automatically qualifies as long-term regardless of actual holding period. That's a huge advantage I wasn't aware of. You make a great point about choosing the right brokerage for the transfer. Do you have any recommendations for brokers that are particularly good at handling complex inherited stock situations? I'm worried about moving everything and then finding out they can't properly track the spinoff allocations or that I lose important historical data in the transfer process. Also, should I be concerned about any potential tax implications from the UTMA transfer itself, or is that typically a non-taxable event since I'm just changing the registration?

The UTMA transfer itself is typically not a taxable event - you're just changing the registration from custodial to individual ownership. However, I'd recommend consulting with a tax professional before the transfer to make sure there aren't any state-specific implications. For brokerages that handle complex inherited stock well, I've had good experiences with Schwab and Fidelity - both have dedicated teams for inherited securities and can import historical cost basis data. Vanguard is also solid but sometimes requires more manual work. The key is to ask specifically about their process for handling pre-2011 inherited stock with multiple spinoffs before you initiate the transfer. When you do transfer, request that they set up separate lots for each spinoff allocation so you maintain the specific identification capability that @Natasha Volkov mentioned. This will give you maximum flexibility for tax planning when you eventually sell.

This is incredibly helpful advice about checking with the state's unclaimed property division! I never would have thought of that resource. Creating a detailed spreadsheet is also a great suggestion - I can already tell this is going to be complicated enough that I'll want everything clearly documented. You mentioned there have been several GE spinoffs over the years. Since I inherited the stock in 1997, do you happen to know which specific spinoffs I would have been entitled to receive shares from? I want to make sure I'm not missing any distributions that I should have received. The timing aspect is confusing me - if a spinoff happened years after I inherited the original shares, I assume I would still be entitled to receive those spinoff shares based on my ownership at the time of the distribution, correct?

You're absolutely correct about receiving spinoff shares for distributions that occurred after you inherited the original stock. As long as you held GE shares on the record date for each spinoff, you would have been entitled to receive the new shares regardless of when you originally acquired the GE stock. The major GE spinoffs that would likely affect shares inherited in 1997 include: Synchrony Financial (2014), GE Capital Aviation Services which became AerCap (2021), and the more recent splits into GE Aerospace, GE Vernova, and GE HealthCare (2023-2024). There may have been smaller spinoffs or special dividends in between that I'm not recalling. Your broker should have records of all distributions you received, but if the UTMA account was with a smaller firm or if records are incomplete, you can also check GE's investor relations website for their complete corporate action history. They maintain detailed records of all spinoffs, stock splits, and special distributions with the corresponding dates and allocation ratios. The state unclaimed property search is definitely worth doing - I found records there for a small distribution that my broker had completely missed in their statements.

Absolutely agree about getting a tax professional involved! This thread has been incredibly helpful, but inherited stock with multiple spinoffs is definitely one of those situations where the cost of making a mistake can far exceed the cost of professional advice. I'm new to this community but dealing with a similar situation - inherited some Altria stock that went through the Philip Morris International spinoff years ago. Reading through everyone's experiences here has been eye-opening about how complex these calculations can get. The suggestion about keeping detailed records and creating that spreadsheet documentation is something I'm definitely going to implement. Thanks to everyone who shared their experiences and resources. It's reassuring to know there are tools and services available to help navigate these complicated situations, and that I'm not the only one who finds this stuff overwhelming!

Thanks @Josef Tearle for the detailed explanation! This is really helpful. I m'just getting started with understanding all of this, but the proportional allocation concept makes sense when you break it down like that. One quick question - when you mention checking with Altria s'investor relations for allocation percentages, is that something they typically provide for free? I m'trying to avoid unnecessary costs while I m'figuring all this out, especially since I m'seeing there might be professional consultation fees involved too. Also, I noticed several people mentioned Form 8937 earlier in the thread. Should I be looking for Altria s'Form 8937 from 2008 for the PMI spinoff, or are there other documents that might be more helpful for getting the exact allocation ratios?

Yes, Form 8937 is exactly what you want to look for! Companies are required to file this form with the IRS for significant corporate actions like spinoffs, and it includes the specific allocation percentages and basis calculation methods. For the Altria/PMI spinoff in 2008, you'd want Altria's Form 8937 from that year. Most investor relations departments will provide this information for free - it's public information once filed with the IRS. You can usually find historical Forms 8937 on the company's investor relations website, or request them via email or phone. If you have trouble locating it, the IRS also maintains copies, though getting them directly from the company is usually faster. Some companies also publish "tax information letters" or "basis allocation statements" that summarize the key details from Form 8937 in plain English. These can be really helpful for understanding exactly how to apply the allocation percentages to your specific situation. I'd recommend starting with Altria's investor relations website and searching for "corporate actions" or "tax information" - they may have a dedicated section for historical spinoffs and mergers that includes all the documentation you need.